How Divorce Can Affect A Bankruptcy


The decision to file for bankruptcy can be stressful enough. Having just experienced a divorce can make the process more difficult. There are many things to consider when filing for bankruptcy and how you proceed can affect the outcome of your case. In some cases, it may better to file for before you file for divorce. Due to the many differences in bankruptcy laws per state, filing together or separate could be affected by these differences.

Bankruptcy In Marriage

One of the biggest reasons to file for before you file for divorce is the ease of the transition into divorce. For any couple filing for divorce, an agreement about how the debts and assets will be divided must be reached. Bankruptcy can greatly complicate this process and make splitting your affairs more difficult.

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When filing for bankruptcy in marriage, filing together or separate can also impact your case. Filing separately can protect the credit standing for the non-filing spouse. The spouse that files for bankruptcy separate from their spouse may obtain a discharge of their personally liable debt and their portion of a joint debt. For couples that have an unbalanced debt share, filing separately can be more beneficial than filing together. If one spouse accrued more of a debt burden than the other spouse, their debts can be eliminated without the non-filing spouse risk the debt liability or credit impact of a bankruptcy.

For couples that have more shared debts, filing together may result in better bankruptcy protection than filing separately. Filing together in marriage can protect more of the assets from seizure and liquidation than an individual filer. However, you should consider whether filing for bankruptcy together would prevent you from financially qualifying for bankruptcy protection. If your combined income is above a specified amount, you may not be eligible for debt relief through bankruptcy.

Bankruptcy After Divorce

The bankruptcy process can complicate how debts and assets are divided in a divorce. All property is considered community property in marriage. Any property that is vulnerable for seizure may be taken from the non-filing spouse after the divorce. If a divorcee files for bankruptcy, any non-exempt property may be seized by creditors; regardless of who is in possession of the property after the divorce. Dividing up assets, and protecting those assets, is far more difficult if the bankruptcy is filed after a divorce.

For any debts accumulated on a joint account, both individuals assume equal responsibility of those debts, if they were acquired during marriage. If a divorcee receives a discharge to a jointly held debt after a divorce, the non-filing individual may be left solely liable for the debt after a divorce. For the divorcee that is court ordered to provide spousal or child support payments, these payments are not eligible for bankruptcy protection. One spouse may find their assets seized or wages garnished to satisfy domestic support payments after a divorce.

There are different benefits and risks associated with filing for together, separate, married or divorced. Couples considering bankruptcy should contact a qualified bankruptcy attorney to help them make an informed decision


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